“Speaking of Entrepreneurs” is an Allegis Capital blog dedicated to assisting entrepreneurs in their understanding and acquisition of venture capital. We also want to help entrepreneurs in their success post venture capital financing.
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July 13, 2012 source: Bloomberg News
Robert Ackerman, founder and managing director of Allegis Capital, talks about venture capital investment opportunities in technology in an interview with Deirdre Bolton on Bloomberg Television’s “Bloomberg West.” Ackerman also discusses the impact of the Obama administration’s Jumpstart Our Business Startups Act on investment.
This article was written by Tim Devaney and Tom Stein published in ReadWriteStart, June 18, 2012
After funding a boom in sketchy startups targeting heavily hyped consumer categories such as social media and mobile, smart venture capitalists are returning to their senses and investing in companies that emphasize solid fundamentals, like paying customers and profits. That’s why enterprise software companies are finally getting the attention – and dollars – they deserve.
Venture capitalists are armed to the teeth with analytical tools. And they should be. Their careers depend on making intelligent investment decisions. And yet, against reason, VCs often behave like teenagers, throwing their money at companies simply because they’re in fashion…
Social Is Overcapitalized
“I see some people looking at the enterprise space again, probably as a reaction to areas like social being overcapitalized,” says Bob Ackerman, managing director at Palo Alto-based Allegis Capital. “The logic in the venture herd seems to be, ‘If five companies in an area are gaining traction, let’s create 500.’ But at some point reason prevails and people say, ‘Hang on, that’s not going to work out. What are other areas that are not as excessively capitalized?’ There’s some of this phenomenon from a venture perspective as it relates to the enterprise.”
Allegis Capital has long invested in enterprise startups, whether they’re trendy or not, targeting companies aimed at business problems that require high-value, technology-based solutions. These companies may not be sexy but they pay the bills, because enterprises have problems and they will spend money for solutions.
Avoiding the Herd Mentality
“Part of the challenge in the venture world is that people want to hitch their wagon to the fastest-moving star,” Ackerman says. “The problem with that approach is that when you see the herd moving in a given direction, it’s probably too late. So we tend to be counter-cyclical at Allegis. We don’t want to be running with the herd because it tends to pull down returns.”
It’s not only VCs who travel in herds, he adds, but entrepreneurs as well. Ackerman has watched a lot of talented engineers shift their focus to social media and other consumer internet startups in the past few years. Enterprise software is hard, and a lot of entrepreneurs these days are impatient.
Fighting Immediate Gratification
“This is a change,” he says. “Go back 15 years – people were more studied about identifying an opportunity and building a company for the long term. But when you get into these boom-and-bust cycles, with people trying to capture the boom, it’s driven by a desire for immediate gratification. That has sucked some of the air out of the enterprise space.”…
The Laws of Physics Still Apply
As the investment data indicates, VCs are once again recognizing the fundamental strength of enterprise startups – and putting more money into them.
“Some investors left the enterprise for the promise of faster returns,” Ackerman says. “But you will see more people waking up to the realization that the streets aren’t paved with gold, the laws of physics still apply, and let’s go back to doing things the old-fashioned hard way.”
by: Robert Ackerman, co-founder, Allegis Capital
Venture capital is not dead. Despite the protests from the Kauffman Foundation and others about its demise, it is very much alive.
First and foremost is the incredible new era of entrepreneurial innovation and creativity – a Cambrian Explosion within the technology universe. The Cambrian Explosion refers to a period of evolutionary innovation about 500 million years ago when most forms of life ceased to exist and entirely new life forms began to develop. That’s exactly what’s happening in the innovation economy today.
Groundbreaking developments in cloud computing, social media and mobile technologies are giving rise to an entirely new technology ecosystem. What’s really interesting is that innovation is pushing out in all directions simultaneously. For young companies, the opportunity to disrupt the status quo and create value is unprecedented. And from an investor’s perspective in Silicon Valley, it does not get much better than that.
What’s more, there is a security overlay that must now sit on top of all of these breathtaking innovations. To a large degree, the high-tech universe was built on computing, communications, and storage—the three legs of the innovation stool. Security has become the fourth leg of this innovation stool because of the interconnected nature of the global economy and the untold risks associated with the sharing of information…
To continue reading this post and see the comments from readers, please continue to peHUB.com.
February 10, 2011 source: NBC News
Kevin Brown of Coraid helps the world store a staggering amount of information.
To watch the video click Big Data – NBC News
On February 6, 2012 I will be giving a keynote speech at the IBF Corporate Venturing and Innovation partnering conference. I will discuss the best practices and pitfalls organizations can face in the Corporate Venturing arena. As readers of this blog, here is an advance look at my slides. Here is the link to the conference in case you want to sign up. It is going to be an amazing conference with lots of corporations there looking to build partnerships with startups and companies looking to grow their business.
January 9, 2012 source: Xconomy
Corporate partnering is the keystone of Allegis Capital’s investment strategy. Given my 15 years as an investor, I recently put together these thoughts on partnering which were distributed by XCONOMY and Global corporate venturing publications.
Fifteen years ago, the expansion model of a startup was fairly linear: The first three years were dedicated to building the business domestically. Year four generally saw European expansion. And by year five, the company was starting to explore the Asian markets.
The emergence of the Web as a viable commerce vehicle, though, brought about a paradigm shift in the startup world that obliterated that model—and forced entrepreneurs to change their plans. Rather than ignoring the global marketplace, today’s smart startups need to think with an international perspective from Day One—and work quickly to expand their footprint.
Of course, becoming part of the global network during a company’s formative days (when budgets are tight and research and development is crucial) isn’t easy, even with the advances and inroads the Web has introduced. At Allegis Capital, where I am managing director, many of our portfolio companies have found that the surest path to becoming an international company is by partnering with large, multinational corporations.
It’s a strategy that might sound curious at first. Big business works at a different speed and with different priorities than the startup world. But the backing of a large corporation can not only supplement a startup’s bottom line; it can also open doors that might otherwise remain firmly shut.
Beyond that, this sort of strategic partnership can provide market analysis that is impossible for startups to gather on their own, acting—essentially—as the ultimate focus group…
December 23, 2011 source: New York Times
… a venture capitalist at Allegis Capital who specializes in cybersecurity. “Companies don’t want to talk about cyber attacks,” Mr. Ackerman says. …
Bob Ackerman was quoted in Nicole Perlroth’s article about cyber attacks.
Insurance Against Cyber Attacks Expected to Boom by Nicole Perlroth, New York Times
Sony is still awaiting the final tally for losses related to its data breaches earlier this year. At last count, it had compromised 100 million customer accounts, and Sony anticipated the debacle would cost $200 million. With 58 class-action suits in the works, that may be wishful thinking.
Now for the really bad news: Sony’s losses aren’t insured.
In a lawsuit, Sony’s insurer, the Zurich American Insurance Company, reminded the company it does not own a cyber insurance policy. Sony’s policy only covers tangible losses like property damage, not cyber incidents.
“That’s cyber insurance in a nut shell,” said Jacob Olcott, a principal with Good Harbor Consulting’s cybersecurity team. “Everybody needs it, and most companies don’t realize they don’t have it until it’s too late.”
Despite high-profile cyber attacks at Sony, Google, Epsilon, RSA and others this year, only a third of companies surveyed by Advisen, a research group, say they have purchased a cyber insurance policy.
Experts say that more companies will buy policies in the coming year because of new Security and Exchange Commission requirements. Last October, the S.E.C. issued a new guidance requiring that companies disclose “material” cyber attacks and their costs to shareholders. The guidance specifically requires companies to disclose a “description of relevant insurance coverage.”
That one S.E.C. bullet point could be a boon to the cyber insurance industry.
Cyber insurance has been around since the Clinton administration, but most companies tended to “self insure” against cyber attacks, says Robert Ackerman, a venture capitalist at Allegis Capital who specializes in cybersecurity.
“Companies don’t want to talk about cyber attacks,” Mr. Ackerman says. “All of a sudden, breaches are now going to be more visible and people are going to have to start estimating their costs.”
There are no statistics on the size of the cyber insurance industry, but Peter Foster, a senior vice president at Willis North America, an insurance broker, estimates there may be $750 million worth of premiums placed. With the recent S.E.C. measure and the frequency and severity of cyber attacks growing, Mr. Foster predicts that figure could grow by 50 percent over the next 12 to 18 months…
Read the full article and comments at the New York Times
What’s Left to Know? A report by Orange Silicon Valley, the Group’s development center in San Francisco, raises new questions about the direction of IT/Internet tech research in Silicon Valley
As more and more corporate giants move their research centers to the Silicon Valley, a new study from Orange raises questions about the current patterns of academic research in IT and the Internet. In-depth interviews with leading technology and academic researchers reveal changes in attitudes, methodology and motivations that are impacting the way information technology research has been quietly but massively transformed by the unpredictable and disruptive growth of the Internet
Interviews between veteran Silicon Valley reporter Lee Gomes, and researchers from Google, Facebook, Microsoft, UC Berkeley, Stanford and more, were conducted in the spring and summer of this year. The results are being made available to the public for free as part of open dialog about the evolution of the industry.
According to one of the themes of the report, the emergence of research centered on so-called Big Data – the digital exhaust of massive platforms like Facebook and Twitter – has given corporate players an edge over academic institutions lacking the data and the infrastructure to crunch these massive data sets. New technical challenges are revealing themselves continuously to internet firms as the scale, speed as well as nature of the gigantic and chaotic real-time data flows require new solutions and approaches that do not exist today. The growth in the Internet is amplified by mobile, social, and connected TV applications that, together with their worldwide reach, are dictating which tech advances matter.
Here is a selection of Bob Ackerman’s observations. To read everything, download the full Report.
Question from Lee Gomes: What do companies need to know if they want to invest in Silicon Valley?
Answer by Bob Ackerman: Venture capital is a club, a tight little club, organized around managing risk. As a VC, I want to invest with people I’ve invested with in the past, because I know how they’re going to be there when times are good and when times are tough. We syndicate. We share information. I’ve got everybody calibrated.
But a corporation is different. The corporation walks in and says, ‘Hi, I’m from a big global company. Perhaps you’ve heard of us. We operate in 110 companies around the world. We have 140,000 employees. We have a market cap of $42 billion. And we’re inviting ourselves to your party.”
The polite venture capital response to them is, “Fantastic, let’s find things we can collaborate on.” But what the venture capitalist is actually thinking is ‘Okay, what can I sell to this guy? How do I pull money out of his pockets and use it for whatever I need to get it into?”
Lee: So what should he say instead?
Ackerman: The more truthful kind of response would be, “Who cares that you’re a big global company, because you may be here today, but you’re going to be gone tomorrow. You’re reassuring me of your commitment, but you’re corporate direction is going to change. You’re not a long term player. And so you’re going to be a tool of convenience for me in my ecosystem.” …
The history of corporate venturing, with few exceptions, has born that out. They get in, and they get out. Every two years, you’ll have new people in place. You’ll have changes in strategic direction. Corporate priorities will ebb and flow. When the markets get competitive, the top corporate guys look at the venture program – which is usually generating losses – they say ‘Who got us into this? Fire him. Get us out of it.” They forget everything they learned. But five years later, they’ll decide to start all over again.
Lee: So why should companies bother with Silicon Valley in the first place?
Ackerman: When you’re seeing the future for the first time, there’s a leap of faith required. As venture capitalists in Silicon Valley, we’re in the business of inventing the future. Yet that’s very difficult to do, and that’s why venture capitalists sometimes have a herd mentality, like, “If one of those is good and successful, we need 400 of them.” But it’s the guy who does it the first time, who sees it for the first time, who has the conviction to pursue that vision and organize people around him – how rare that type of person really is.
Lee: The take-aways?
Ackerman:Companies who think they can use occasional venture investments to gain access to Silicon Valley research will be greeted with open arms. Then, the trouble will begin. They should keep an eye on their wallets.
November 28, 2011 source: peHUB
The American economy is a mess. Growth has been stuck at a tortoise-like pace for years. The unemployment rate continues to hover at nine percent or higher. And faltering research and development threatens not only innovation, but our future.
The good news is there’s a fix for this: The U.S. government simply needs to invest more in research and development, with a particular emphasis on fundamental scientific research. This specialty field is both the seed for innovation and the key to healthy, long-term economic growth.
Why the government and not the private sector? Attractive startups need the opportunity to build advancements in areas like energy, next-generation Internet, secure communications and nanotechnology. This requires patient capital, something the government has and the private for-profit sector doesn’t. While venture capitalists are capable of allocating investment capital when the risk/reward ratio is appropriate, only the government has the resources to support a multi-year, multi-decade commitment in scientific research.
The need for this sort of investment is compelling. The Information Technology and Innovation Foundation, a Washington-based policy think tank, recently measured “the rate of change in innovative capacity” over the past decade among the top 40 industrialized nations. Essentially, that’s a look at how countries were preparing themselves to be more innovative in the future – and the U.S. ranked dead last…
Read the full article and comments at peHUB
November 7, 2011 source: Xconomy | San Francisco
$50 million—New venture financing announced November 3 for Coraid, the Redwood City, CA-based maker of storage systems for virtualized data centers. Crosslink Capital led the round, which was joined by existing investors Allegis Capital, Azure Capital Partners, and Menlo Ventures and new investors Seagate Technology and Kinetic Ventures.
November 3, 2011 source: Coraid
Crosslink Capital Leads Investment to Accelerate Worldwide Adoption of Ethernet SAN
Coraid® Inc., a leading developer of Ethernet SAN solutions, announced that it has closed a $50 million investment round led by Crosslink Capital, with participation from existing investors Menlo Ventures, Allegis Capital, Azure Capital Partners and affiliates of Silver Lake, as well as new investors including Seagate Technology and Kinetic Ventures. The company also announced that it has surpassed 1,500 customers in 45 countries, marking Coraid as one of the fastest-growing vendors in the enterprise data storage industry. With this new round of financing, Coraid will expand global operations and accelerate innovation in storage and cloud orchestration.
“In the era of big data, virtualization and cloud computing, the $30 billion data storage industry is ripe for disruption. Coraid has cracked the code on delivering unmatched price-performance and simplicity, and they’ve proven this value with more than 1,500 customers,” said Jim McLean, partner at Crosslink Capital. “More importantly, Coraid has developed a uniquely elastic and automated storage architecture that can replace multiple tiers of legacy storage. We’re extremely pleased to join the team.”
Coraid EtherDrive® storage arrays harness the power of massively parallel Ethernet and the scale-out CorOS™ operating system to deliver faster performance than Fibre Channel, at about one-fifth the cost. EtherDrive storage arrays can be deployed in less than 60 seconds and present themselves to servers as direct-attached storage. Coraid recently announced the acquisition of cloud orchestration software vendor Yunteq™ to enable policy-based automation of storage, networks, and security for public and private clouds.
The company is also taking advantage of major performance improvements in flash storage. At VMworld 2011 in Las Vegas, Coraid unveiled its EtherFlash™ solution, which delivers extreme performance of nearly 200,000 IOPS per shelf using standard solid state drives (SSDs), starting at under $10/GB. In contrast to specialty flash storage arrays, Coraid’s platform gives enterprise customers total flexibility to mix and match SSD, SAS, and SATA drives to meet a wide variety of workload requirements.
“Coraid has pioneered a critical new category of storage – Ethernet SAN – and we are very optimistic about this next phase of expansion for the company,” said John Jarve, general partner at Menlo Ventures. “We see a massive pain point in the market as customers struggle to handle data growth with aging storage technologies. Coraid is defining the next generation of scale-out virtualized storage.”
“Legacy storage architectures are the number-one roadblock to virtualization and cloud computing, and Ethernet SAN is uniquely positioned to break through that roadblock,” said Kevin Brown, CEO of Coraid.
“Coraid is passionate about helping customers worldwide gain control of data growth, while driving complexity and cost out of their IT operations. Adding $50 million in funding and experienced new investors to our team will help us accelerate this mission,” said Audrey MacLean, Coraid’s chairman.
October 11, 2011 source: Simplified
Symplified Invited to Present at 2011 SINET Showcase
BOULDER, Colo., Oct.11, 2011 – Symplified®, the Cloud security company, today announced that it was selected as an innovator and will present at the 2011 Security Innovation Network (SINET) Showcase, which is supported by the Department of Homeland Security Science and Technology Directorate. More than 100 IT security providers were evaluated, with the 16 most innovative companies invited to demonstrate at a prestigious showcase event at the National Press Club in Washington, D.C. on October 26th. Darren Platt, CTO of Symplified will demonstrate the company’s cloud identity and access management solution to an audience of representatives from defense, homeland security, intelligence and civilian federal agencies as well commercial, investment and research communities.
In April, President Obama released the National Strategy for Trusted Identities in Cyberspace (NSTIC), which directs public and private sectors to collaborate to raise the level of trust associated with the identities of individuals, organizations, networks, services, and devices involved in online transactions. The SINET competition identifies innovators in the private sector to ensure that participating federal agencies such as the Department of Homeland Security (DHS), the National Security Administration (NSA), the Department of Defense (DoD), the Office of the Director of National Intelligence (DNI), and the Federal Government are best equipped from a cybersecurity perspective to protect the country and its interests.
“It is an honor to be selected a SINET 16 Innovator,” said Darren Platt, CTO of Symplified. “There is significant interest in cloud computing among federal agencies, with security remaining one of their chief concerns and barriers to adoption. Symplified was selected as an innovator for our unique ability to extend and enforce access security policies on public and private cloud applications regardless of the device being used. I look forward to presenting at the conference and forging relationships with representatives from the government, defense and intelligence communities.”
Darren Platt is co-founder and CTO of Symplified. He is a thought leader on identity management technology, and co-authored the AuthXML specification which was combined with Netegrity’s S2ML to create Oasis’ SAML standard. Previously, Mr. Platt was vice president of engineering at Web access management market originator Securant Technologies, where he managed development of the ClearTrust product until its acquisition by RSA Security in 2001.
About the Security Innovation Network™
The Security Innovation Network™ (SINET) mission is to advance innovation and enable global collaboration between the public and private sectors to defeat cybersecurity threats. SINET serves as the catalyst that connects builders, buyers, researchers and investors in the cybersecurity ecosystem. SINET accelerates business opportunities for both small and large organizations through strategic advisory services, community-building activities and networking events. The annual IT Entrepreneurs’ Forum (ITSEF) in Silicon Valley, the Innovation Summit in Boston at MIT and SINET Showcase in Washington D.C. are supported by the U.S. Department of Homeland Security Science & Technology Directorate and public and private sponsorships.
The organization, founded in 2006 by retired U.S. Secret Service Agent Robert Rodriguez, has developed a strong following of cybersecurity professionals and an elite steering committee representing the nation’s top cybersecurity influencers. For more information visit www.security-innovation.org or follow @SINETconnection on Twitter.
About Symplified | The Cloud Security Company
Symplified provides the trust fabric of the Cloud by enabling companies to extend and enforce identity and access management policies on Cloud applications. The Symplified Suite unifies Web access management, federated SSO, auditing and user management across any access device. Meanwhile, the Symplified Trust Cloud™ is woven into the fabric of the Amazon Web Services platform and capable of delivering identity and access management services on a massively scalable and global basis. The company has been recognized by the Wall Street Journal, CRN, Network World, the RSA conference, and others for its innovations. Symplified’s management team created Web access management market originator Securant and the ClearTrust product, which was acquired by RSA Security. The company has received financing from leading venture capital firms Granite Ventures and Allegis Capital. Symplified is headquartered in Boulder, Colo., with offices in Palo Alto, Calif.
October 11, 2011 source: Forbes
For many companies, data is one of the most valuable assets. Just imagine if you suddenly lost all your records or product designs? Yes, it would be a disaster.
So for serial entrepreneur Justin Moore, this looked like a massive opportunity. To this end, he created Axcient, which provides comprehensive backup services – primarily for the small and mid-sized business (SMB) market.
No doubt, it’s a lucrative segment. Companies like Intuit (Nasdaq:INTU) and Paychex (PAYX) have made a fortune by selling to SMBs. And online operators, such as LinkedIn (NYSE:LNKD), are also getting traction in the market.
Interestingly enough, Axcient is a bit of a hybrid tech company. Its solution involves an on-premise device that is hooked into the cloud. Yet the billing is based on a subscription model.
But Axcient is more than just about storing data. Instead, it also preserves your applications, such as Microsoft’s (Nasdaq:MSFT) Exchange Server. So in an emergency, you can restore your information technology (IT) environment in a snap. This definitely compares favorably to other storage offerings. Simply put, SMBs want a one-stop solution.
All in all, Axcient has been growing at lightning speed. For 2011, the company expects to spike recurring revenues by 4X, with the management of over 100,000 customer laptops and servers.
Axcient has also snagged a round of $15.5 million in venture capital. The investors include Scale Venture Partners, Allegis Capital, Peninsula Ventures and Thomvest Ventures.
So now it’s a matter of aggressively scaling the operation. But more importantly, Axcient is targeting a market that is ripe for disruption – and the company appears to have the right product to make this happen.
Read the original article and any comments at Forbes
Lots of great news from our portfolio company Axcient. Congrats to a well executing team.
October 3, 2011 source: TechCrunch
Axcient, the hybrid cloud-based data backup, disaster recovery, and business continuity startup, is today announcing that it has closed a $15.5 million round of series C funding. The round was led by Scale Venture Partners, the VC firm that has led investments in other cloud services companies like Box.net and DocuSign, with participation from previous investors like Allegis Capital, Peninsula Ventures, and Thomvest Ventures.
The series C investment brings Axcient’s total funding to $33.5 million, and SaaS veteran and Scale Ventures Managing Director Rory O’Driscoll will be joining the startup’s board of directors as part of the investment. O’Driscoll also sits on the boards of companies like JasperSoft, Lumension Security, mBlox, Omniture, Picolight, ScanSafe and Vantage Media.
The company will be using its latest infusion of capital to triple the size of its marketing and sales team, roll out its services internationally, and grow its staff of 80 to 120+ over the next six months.
Today, small businesses looking to protect, back up, and optimize their most valuable asset, their data, often have to work with three or four different hardware and software solutions, combining services like Symantec BackupExec with tape or NAS or other online backup services and local hardware solutions. Cobbling these different solutions together to achieve maximum protection, backup, deduplication, and disaster recovery is a pain in the ass. Especially for how fundamental these services are to small businesses. One day without email or access to core parts of their network can be crippling to a young startup…
Read the full article and comments at TechCrunch
Cyber security venture capital investing isn’t quite as hot as investments in social media and related areas. But the opportunities are still enormous today because government entities and companies have no choice but to continually update their security protection against ever more sophisticated and determined hackers.
It’s hard to believe, but the Department of Defense’s U.S. Cyber Command says that the U.S. government alone is subjected to about 6 million computer network probes daily by some 2,000 originators, including foreign spy organizations. Perpetrators are seeking information they can steal and monetize in the global economy, such as intellectual property and trade secrets, and this is obviously a gigantic and growing threat.
The number of acquisitions in security technology has been growing steadily and isn’t limited to the startup world. Last year, there were 150 deals, including Intel’s $7.7 billion acquisition of McAfee and Hewlett-Packard’s $1.6 billion acquisition of ArcSight, up from 69 in 2007. Forrester Research says that security now accounts for 14 percent of information technology spending, up from 8.2 percent in 2007.
Cyberspace attacks grow not only because of advances in technology but also because it’s a lot easier to steal in cyberspace. It’s about manipulating 1s and 0s; attackers don’t have to worry about getting past guards and dogs to break into the vault. The vast majority of government and corporate-directed attacks are stopped, of course, but more are getting through because hackers are constantly innovating – and because much more always has to be spent on defense than offense.
Think about it. While attackers only have to be right periodically, potential targets have to be right every time. It’s an arms race, and it will not stop because the hackers will not stop and the cost of cyber security failures is much higher than the cost of new cyber security investments.
Another factor certain to spark near-perpetual growth is the explosion of wireless devices, which greatly expand the size and complexity of computer networks and introduce billions of additional points of vulnerability. There are about 2 billion wireless devices in use today, and I see the number exploding to 50 billion by 2020.
This isn’t a good scenario for the country overall but it presents a strong and persistent opportunity for VCs and others who focus on cyber security investments. The “good guys” will eventually close the security gap against the “bad guys” – but things will get worse before they get better, and constant vigilance will always be required.